1
AASHISH JAIN
ASSISTANT PROFESSOR
SRI VENKATESWARA COLLEGE
Bonus Issue of Shares
1) Ashoka Ltd has an authorized equity capital of Rs 20,00,000 divided into shares of Rs 100. The
paid-up capital was Rs 12,50,000. Besides this, the company had 9% redeemable cumulative
preference shares of Rs 10 each for Rs 2,50,000. Balance on other accounts were: Securities
Premium Rs 18,000; Profit & Loss Account Rs 72,000 & General Reserve Rs 3,40,000. Included
in sundry assets were investments of the face value of Rs 30,000, carried in the books at a cost
of Rs 34,000. The company decided to redeem the cumulative preference shares at a premium
of 10% partly by issue of equity share of the face value of Rs 1,20,000 at a premium of 10%.
Investment was sold at 105% of their face value. All preference shareholders were paid off
except 3 holders holding 250 shares. After redemption of cumulative preference shares, fully
paid bonus shares were issued in the ration of 1:4. Give the necessary journal entries bearing
in mind that the Directors wanted a minimum reduction in free reserves while effecting the
above transactions.
(Ans CRR: Rs 1,30,000 & no. of bonus shares: 3,425)
2) X Ltd whose issued share capital on 31st March, 2022 consisted of 24,000, 10% Preference
Shares of Rs 100 each fully paid-up & 60,000 Equity shares of Rs 100 each, decided to redeem
preference shares at a premium of Rs 10 per share. The company’s balance sheet as on 31-3-
2022 showed a general reserve of Rs 28,00,000. The redemption was affected partly out of
the proceeds of a new issue of 12,000 shares of Rs 100 each at a premium of 35 per share. On
1st July, 2022, the company at its general meeting resolved that the reserves for applied in the
following manner:
i) The declaration of bonus share on equity shares for the purpose of making the said
equity shares fully paid at the rate of Rs 10 per share.
ii) The issue of bons shares to old equity shareholders in the ratio of share for every five
shares held by them.
You are required to pass necessary journal entries.
(Ans CRR: Rs 12,00,000 & no. of bonus shares: 14,400)
3) The following is the balance sheet of Mitra Ltd as on 31st March, 2022:
Assets Amount (Rs) Liabilities Amount (Rs)
5,000, 10% preference Fixed assets 13,70,000
shares of Rs 100 each 5,00,000 Investment at cost (market
90,000 equity shares of Rs value: Rs 2,80,000) 3,00,000
10 each 9,00,000 Stock 9,00,000
Securities premium 1,00,000 Debtors 1,00,000
General reserve 7,50,000 Cash at bank 1,75,000
Profit & loss 2,00,000 Cash in hand 5,000
Current liabilities 4,00,000
28,50,000 28,50,000
It was decided on 30th June, 2022 to redeem the preference shares at a premium of 5%. To
finance the redemption, all the investments were realized at market value & 10,000 equity
shares were issued at Rs 9 per share payable on application and the final call has not made
yet. The company also issued 10,000, 12% debentures of Rs 100 each. On 1st August, 2022,
the company made a bonus issue of one equity share for each two equity shares held on that
2
AASHISH JAIN
ASSISTANT PROFESSOR
SRI VENKATESWARA COLLEGE
date. It was also decided that only minimum reduction should be made in the revenue
reserves.
Draft journal entries including those relating to cash transactions to record these transactions
& show the balance sheet after the redemption of preference shares & issue of bonus shares.
(Ans CRR: Rs 4,10,000 & no. of bonus shares: 50,000)
4) Ajanta Trading co. Ltd has an authorized capital of Rs 8,00,000 divided into:
10,000, 6% Preference shares of Rs 10 each;
20,000, 7% Preference shares of Rs 10 each
50,000 Equity shares of Rs 10 each
On 1st January, 2022, the whole of the two classes of preference shares & 15,000 of the equity
shares stood in the books as fully paid. The securities premium account as on that date
showed a balance of Rs 20,000. The balance of profit was Rs 32,000. On 1st July, 2022, it was
decided to redeem the whole of 6% preference shares at a premium of Re 1 per share & for
this specific purpose, the company issued for cash 8,000 equity shares of Rs 10 each at a
premium of Rs 2 per share, payable full-on allotment. All the above shares were taken up. The
cost of issue of shares amounted to Rs 3,000. On 1st October, the company issued to existing
shareholders one bonus shares of Rs 10 fully paid for each five held. It is the intention of the
directors that minimum reduction should be made in revenue reserve account which stood at
Rs 1,25,000. Give necessary journal entries.
(Ans CRR: Rs 20,000 & no. of bonus shares: 4,600)
5) The following is the summarized balance sheet of Disha Ltd as on 31st March 2022:
Liabilities Amount (Rs)
1,00,000 Equity shares of Rs 10 each fully paid 10,00,000
60,000, 10% Preference shares of Rs 10 each, Rs 8 Called up 4,80,000
Capital reserve 2,00,000
General reserve 2,50,000
Securities premium 1,20,000
Profit & loss A/c 4,00,000
Sundry creditors 2,00,000
Total 26,50,000
Assets
Net Block 10,00,000
Investments 4,00,000
Inventories 4,50,000
Account receivables 7,80,000
Cash at Bank 20,000
Total 26,50,000
On 1st April 2022, the company made a final call on its preference shares & it was paid by all
the shareholders. Thereafter, the company redeemed the fully paid preference shares at a
premium of 10%. In order to pay off the preference shareholders, the company sold its
investments, realizing Rs 4,40,000 & issued 2,000, 11% preference shares of Rs 100 each, the
full amount was called up on application. The company also issued fully paid bonus shares in
the ratio of one equity share for every two equity shares held. Record the above transactions
in the journal of Disha Ltd. making necessary assumptions.
(Ans CRR: Rs 4,00,000; No. of bonus issue shares: 50,000)
3
AASHISH JAIN
ASSISTANT PROFESSOR
SRI VENKATESWARA COLLEGE
6) The summarized Balance Sheet of XY Ltd as on 31st March 2022 is as follows:
Particulars Note No. Amount (Rs)
I EQUITY & LIABILITIES
1. Shareholder’s funds
a) Share capital
i) 10,000, Equity shares of Rs 10 each Rs 8
paid-up 80,000
Less: Calls-in-arrears @ Rs 2 per share 79,700
(300)
ii) 10% Preference shares capital:
1,000, 10% Preference Shares of Rs 100
each 1,00,000
Less: Calls-in arrears on 250 shares
(5,000) 95,000
b) Reserve & Surplus
i. Reserve Fund 50,000
ii. Surplus A/c 87,500
2. Current Liabilities
Trade Payables (Creditors) 32,800
Total 3,45,000
II ASSETS
1. Non-current Assets
a) Fixed Assets
i) Land & Buildings 1,45,500
ii) Plant & Machinery 50,000
iii) Furniture 22,500 2,18,000
b) Non-current Assets
i) Reserve Fund Investment (Face
Value Rs 50,000) 40,000
2. Current Assets
a) Inventories 25,000
b) Trade Receivables 37,500
c) Cash & cash equivalents 19,500
3,45,000
a) Realise investment at a loss of 10%
b) Forfeit the equity shares on which calls are in arrears.
c) Issue 500, 14% Debentures of Rs 100 each at premium of 5%.
d) Forfeit those preference shares on which the call money remained unpaid immediately
before redemption of the preference shares; holders of 200 shares paid his dues in time.
e) Re-issue forfeited preference shares @Rs 50 each.
f) Repay preference shares at a premium of 10%.
g) Re-issue the forfeited equity shares at Rs 12 each as fully paid up.
h) Utilise the profits to make partly paid-up shares fully paid and to issue fully paid bonus
shares at the rate of one share for every two shares held.
(Ans: Capital Reserve – Rs 2,400; CRR – Rs 1,00,000; Balance Sheet: Rs 2,95,800)
